My first impression of the report of the Reference Group on Welfare Reform was not favourable. I couldn’t make sense of it.
The four pillars metaphor got in the way of the story the report was attempting to tell. When I went looking for the structure that the pillars were meant
to support I got lost. So I then went looking for four major problems that
reforms were intended to address and could only find two.
At that point I realized that the pillars were just a device to tell readers that the material in this report has been organised under
four subject headings. The reason why
the material was organized in this way still escapes me, but that probably
doesn’t matter. The report was probably not intended to be read by people like
me.
One of the major problems that the members of the reference
group (Patrick McClure, Sally Sinclair and Wesley Aird) have sought to deal
with is the complexity of the existing system of welfare payments. The report
is concerned that complexity creates problems for individuals in understanding
the system and accessing support, and makes it more difficult to administer the
system efficiently. There is also an underlying problem of inequity, with
people in similar circumstances being treated differently. The reference group
has proposed a simplified payment architecture, with five primary types of
payment. It looks like a sensible reform, but I am not well placed to comment.
The other major problem that the reference group has sought
to address is long-term dependence on income support by people who have
potential to become self-reliant. The report proposes that the problem be
tackled with an investment approach along the lines of that adopted in New
Zealand. The key features of the proposed approach seem to be:
- Conducting actuarial calculations annually to estimate the lifetime liability (i.e. contingent liability to government) of the overall income support system and support for specific groups.
- Identifying those groups at greatest risk of long term income support dependence and those groups with the strongest chance of breaking this reliance with tailored support.
- Making a broad range of services available to assist at-risk clients to break their reliance on income support. The Federal Government is envisaged to be the driving force behind service delivery.
- Ensuring that interventions are evidence-based, and “testing and learning” to ensure continuous improvement of support services.
The proposed investment approach seems promising, but it is
not obvious that the report has taken into account criticisms of the New Zealand
scheme, such as those raised by Simon Chapple in an article published in 2013.
Chapple pointed out that the investment approach adopted in New Zealand can
produce policy outcomes that are inconsistent with a standard cost benefit
framework. For example, the investment approach counts movement of people off
welfare for any reason – including movement into the black or grey economy,
emigrating and going to prison - as a benefit.
It provides the administering agency with an incentive to focus on
reducing government spending rather than achieving more desirable outcomes such
as helping welfare beneficiaries gain employment.
In my view Chapple’s objections to the New Zealand scheme
should probably not weigh heavily against the adoption of a similar scheme in
Australia, but the issue deserves more careful consideration than I can give it
here. It would have been desirable for the reference group to have discussed
the issues involved in its report. It will be interesting to see how Patrick
McClure or other members of the group now deal with the similar criticisms that
have been raised against their proposals by Michael Fletcher. They can hardly
argue that their report speaks for itself.
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